Absence Of Exit Pressure Can Help CVCs Bag Higher Returns Than VCs: Sanjeev Bikhchandani

Longer holding periods and the absence of pressure to provide exits to investors in a fixed time period can help corporate venture funds (CVCs) generate higher returns from their investments than venture capital firms, according to Info Edge founder Sanjeev Bikhchandani.

Speaking at Inc42’s MoneyX, Bikhchandani said CVCs can hold their portfolio for a much longer timeframe than a VC fund, which allows the former the time to see their startups grow.

Talking about his experience with Info Edge, Bikhchandani said, “I think a great benefit that we had when investing from our balance sheet was that we didn’t have the concept of fund life. Typically, a VC fund has a life, which means you have to exit and return the money.”

“Now, if I look at what happened to us in Zomato and Policybazaar… Policybazaar was founded in 2008, and we’re still invested in it. Zomato was founded in 2010, and 13 years later, we’re still a part,” Bikhchandani added.

In contrast, a VC fund would have had to exit Policybazaar in 2014 and Zomato in 2017 to return money to limited partners, the Info Edge founder noted.

The veteran investor noted that “serious, solid appreciation” from Info Edge’s two very early bets has come in the last four to five years, which is beyond the fund life of any VC fund. “So, you have the ability to hold for a much longer time as compared to a VC fund, and that’s the big difference,” he said.

To be sure, Bikhchandani’s Info Edge was among the first investors in both Zomato and Policybazaar. Both companies now hold dominant positions in their respective fields, though both are yet to turn a profit.

Bikhchandani’s comments come at a time when CVC participation in the Indian startup ecosystem is increasing at a rate of 7% per year. India currently has more than 150 active CVCs. Since 2014, corporate venture funds have backed 300+ Indian startups. 

Sanjeev Bikhchandani advised prospective investors to do due diligence, and not invest in a startup just because of the fear of missing out. Once invested, he said, investors need to be patient, adding that early stage investing is a game of patience.

Presented in partnership with Peak XV Partners, supported by Venture Catalysts, JSA, Samsung, IVCA Associates, Indian Angel Network, JIIF and Marwari Catalysts, MoneyX is aimed at bringing the driving forces of the Indian startup ecosystem under a single roof.